Businesses, consumer confidence falls in Q3, looks negative in Q4 – BSP survey

Not surprisingly, the results of the central bank’s Business Expectations Survey (BES) and Consumer Expectations Survey (CES) were not positive and optimistic, as the COVID-19 pandemic has yet to be resolved and most of the economic centers of the country are still measures for quarantine.

The quarterly BES and CES were temporarily suspended in the second quarter due to lockdowns, but resumed for the third and fourth quarter reading.

Based on the latest BES and CES results, both outlooks turned pessimistic for the third quarter compared to what was reported in the first quarter. “This is expected considering the effects of COVID-19 on businesses and jobs,” according to BSP Governor Benjamin E. Diokno, who announced the results during his regular “GBED Talks” on Thursday.

The BES results (conducted from July 8 to September 10) for the general confidence index (CI) were a negative 5.3 percent for the third quarter, reversing the CI of 22.3 in the January period to March this year. As for the CES (July 1-14), the CI also fell to a record low of negative 54.5 percent or the lowest since this survey began in 2007.

In the report, the BSP said that business confidence in the economy turned negative in the third quarter after posting 43 quarters of positive confidence from the third quarter of 2009 to the first quarter of 2020.

Pessimism stems from these factors: the impact on business prospects of the COVID-19 pandemic and community quarantine restrictions; decrease in orders, sales and income; slowdown / temporary closure of business operations; and concerns about government policy, mainly about mitigation measures that are perceived as insufficient to counteract the impact of COVID-19.

According to the BSP, the weak business sentiment extends to the fourth quarter, with CI falling to 16.8 percent from 42.3 percent in the first quarter. Still, the outlook is tied to the negative effects of the COVID-19 pandemic on order volume, sales and revenue, and overall economic activity in general, the BSP said. “Similarly, the business outlook for the country’s economy was less optimistic over the next 12 months as the CI declined to 37.5 percent from 55.8 percent in the first quarter survey results due to (the same) reasons, “he added. The next 12 months here cover the period from August 2020 to July 2021.

Consumer confidence, also pessimistic for the third and fourth quarters, was more optimistic for the next 12 months.

The BSP said the negative consumer sentiment for the third quarter is still due to the COVID-19 pandemic, as well as the following: high unemployment rate and fewer working family members; low and reduced income; and faster rise in the prices of goods.

Consumer pessimism will remain until the last quarter of 2020 with a negative CI of 4.1 percent, said the BSP, adding more reasons such as low, reduced and no increase in revenue.

Meanwhile, BES results showed that companies’ outlook on their business operations is also negative. “In line with the national trend, companies’ business outlook for their own operations turned negative for Q3 2020 compared to sentiment in Q1 2020. Businesses across all sectors anticipate weaker volume of commercial activity and a total volume of registered orders “. said the BSP. It is also the same for the fourth quarter and the next 12 months, as the outlook for the overall volume of business activity was less optimistic.

The business outlook on employment turned negative as well as for the fourth quarter and next 12 months and BSP said this suggests that “more companies may lay off workers in the fourth quarter of 2020 and the next 12 months” as the Capacity utilization also decreases and expands. plans decline for the last quarter of 2020.

“Sentiment on financial conditions fell to -47 percent, and businesses felt that their access to credit is tight with the index of access to credit falling to -15.5 percent for the third quarter of 2020,” said the BSP. “In particular, these are the lowest index levels since the start of the national survey in the fourth quarter of 2006. The negative index means that more respondents reported tight financial conditions and difficulties in accessing credit than those who said otherwise.” .

Companies are also expecting a stronger peso and a lower interest rate, but a higher inflation rate. “The results of the survey showed that companies expect the peso to appreciate, interest rates to fall, but inflation to increase during the third and fourth quarters.”

Diokno said the surveys provide the Monetary Board with advance information on the overall economic and business outlook for each quarter covered and also for the next 12 months. “We believe that the sentiments of businesses and consumers are valuable in shaping not only monetary and financial policies, but also socio-economic policies,” he said.

The BSP said consumers were more optimistic over the next 12 months with a CI of 25.5 percent compared to first-quarter figures of 19.9 percent. “The consumer outlook was more optimistic for the next 12 months due to expectations of an end to the COVID-19 pandemic or a return to normalcy, as well as consumer anticipation of the following: availability of more jobs , additional or high income, and stable prices of goods, ”said the BSP.

By income group, the central bank said that the CES historical low overall CI for the third quarter was reflected across all income groups, from the low income group to the middle and upper income groups. “Aside from the reasons cited for the negative outlook from consumers, consumer confidence for the middle income group turned pessimistic due to expectations of higher household spending. For the fourth quarter, consumer sentiment across all income groups turned pessimistic, but improved over the next 12 months. “

The consumer spending outlook and the household spending outlook hit record lows in the third quarter, while the percentage of households with savings for the period also declined.

Meanwhile, the BSP said that consumers expect inflation, interest rates and unemployment to rise and the exchange rate to appreciate during the third quarter, while inflation will remain within the government’s targets.

“The BSP believes that these surveys are valuable tools not only in shaping the policies of the monetary and financial system, but also in socio-economic policies. This is particularly true amid nationwide efforts to address the impact of the COVID-19 pandemic, ”according to Diokno.

The BES covered 1,517 businesses across the Philippines, while the CES surveyed more than 5,400 households.